But those claims, contained in a civil suit filed Tuesday by the Securities and Exchange Commission, also serve as an indictment of regulators, who once again proved too slow in coming to investors’ aid.

Authorities swarmed the Houston office of Stanford Financial Group, and by the afternoon, the doors were locked and Stanford Financial and its Antigua-based bank had been placed in receivership by a federal judge. In its lawsuit, the SEC claims Sir Allen, Stanford Financial, its Antigua-based bank and two other close associates defrauded investors through the sale of some $8 billion worth of certificates of deposit bearing too-good-to-be-true returns.

The action may be too little, too late. Despite years of controversy and concern, regulators appeared to ignore the ample warning signs.

Never registered

For starters, Stanford Financial never registered as an investment adviser, according to Tuesday’s complaint, which should have tipped off the SEC years ago.

As far back as 2000, the Chronicle reported on the State Department’s concerns about money laundering in Antigua and Stanford’s role in getting the laws changed. Stanford later turned over to U.S. agents more than $3 million in cocaine proceeds from a Mexican drug cartel, the Chronicle reported at the time.

Even if that brush with federal authorities didn’t raise suspicions about Stanford’s operations, the bank itself should have.

Stanford International Bank didn’t make loans. Instead, it invested the deposits in the markets, buying stocks, bonds, precious metals, and dribbling private equity onto a handful of tiny companies. Yet those risky and illiquid investments were supposedly generating security and hefty returns for depositors.

Expensive digs

Michael Harrington, a local mortgage broker, said he visited Stanford’s Houston office in late 2007 and was stunned by the private dining room featuring freshly prepared duck and the private movie studio for viewing Stanford’s promotional videos.

“I was always wondering how they paid for that Galleria-area office,” he said.

Even so, Harrington said Stanford’s pitch won him over. He didn’t invest because he didn’t have the $25,000 minimum required deposit, but he said he did recommend Stanford to clients and friends, referrals he now regrets.

“If I’d have had the money, I’d have put it in,” he said. “I was hyped up about it.”

Recent reports said Stanford was paying returns of more than 4 percent on its CDs late last year, even after conventional banks cut their rates to less than 2 percent.

Harrington showed me a rate sheet from 2006 that listed Stanford’s short-term rates, and they were reasonable at the time at a little more than 4 percent. Five-year rates, though, could be more than double that depending on principal amount. And Stanford claimed to consistently return rates that high.

The bank, in materials posted on its Web site, claimed it could generate such grand returns because it took a diversified approach, investing in companies and markets around the world.

Amid a global recession, it doesn’t matter what country you invest in. Stocks, bonds and metals have all lost money. In fact, 90 percent of the money was put into illiquid private equity deals, the SEC now contends.

Ignoring red flags

Yet to all of this, the SEC and other regulators seemed oblivious. As it did with so many other cases — Bernie Madoff and Bear Stearns, just to name last year’s biggest misses — it ignored the red flags, allowing investors once again to become victims.

Now state and federal regulators are swarming over Stanford, and Tuesday’s civil action is likely just the beginning as they track where the money went.

The answers, of course, lie with Sir Allen himself, who these days is looking less like a knight in shining armor and more like a pirate of the Caribbean.